本文发表在 rolia.net 枫下论坛Chinese Consumers Curb Spending, Likely Deepening Slowdown
As Apple shows, buyers defer major or discretionary purchases, their confidence dented by shaky economy, trade fight with U.S.
Jan. 3, 2019 9:37 a.m. ET
BEIJING—The Chinese consumer, a previously reliable driver of economic growth, is under stress, threatening to deepen a broad slowdown in China’s economy that is rattling global markets.
Consumers have pulled back spending, their confidence dented by the shaky domestic economy and a trade fight with the U.S. Meanwhile, they are feeling pinched by rising costs for already sky-high housing and often inadequate education and health care. As a result, people are putting off big-ticket purchases and limiting their discretionary spending.
No longer just a manufacturer for the world, China has become the largest market for many consumer, luxury and durable goods, as an expanding middle class flexes its spending power. Now, its newfound restraint is pounding the world’s No. 2 economy and rippling across the globe, crimping oil producers, electronics makers, travel services and a slew of other sectors.
Apple Inc. is the latest company to sound the warning, on Wednesday attributing a sharp falloff in iPhone revenue to China’s rapidly decelerating economy. Ford Motor Co. and General Motors Co. have reported significant sales drops for China in a monthslong slump that has hit foreign and domestic auto makers alike.
E-commerce titans, which thrived on robust consumer spending, are hitting speed bumps, with Alibaba Group Holding Ltd. cutting its revenue forecast and JD.com Inc. reporting a fall in active customer accounts. “If people are not buying new apartments or new homes, they’re not buying refrigerators,” Alibaba Vice Chairman Joseph Tsai told reporters in November.
Zhang Zhihong and her husband, an executive at a tech company, make a nearly $3,000 monthly mortgage payment on their apartment. After Ms. Zhihong left her job at a think tank in Beijing last year to find something closer to home to care for their 3-year-old child, the family put a hold on plans to trade in their Subaru XV crossover.
“I used to be, you know, rather carefree in spending. But after I had the kid and left my old job, I’m definitely thinking twice before any large spending,” she said.
Consumers, whose spending has expanded by double digits for most of the past decade, were supposed to power the Chinese economy for years to come. The government counted on them to buoy growth as its planners tried to shift a maturing economy toward services and away from the big-ticket infrastructure and smokestack industries that were creating debt and pollution.
The current slowdown stems in part from government policies to hold down housing prices and curb rising levels of mostly corporate debt. Additional drag has come from the trade fight between the U.S. and China. The two sides have levied punitive tariffs on products that make up 60% of their trade, injecting new risk for companies at home and markets abroad.
“Trade frictions with the U.S. disrupted a longstanding belief that China’s economic expansion will continue, albeit at a slower pace, thanks to its connection with the rest of the world,” said Fan Lei, an economist at brokerage firm Sealand Securities. Now, he said, worries about the strength of that connection are causing Chinese consumers to scale back.
Retail sales eased during most of last year, with growth decelerating to 8.1% in November—the lowest level in more than 15 years. Consumption accounted for more than three-quarters of China’s economic growth last year, but is likely to fall to just under two-thirds this year, said Wang Bin, a Commerce Ministry official.
In recent months, investment in factories, buildings and the like slowed to a rate unseen in at least a quarter-century before stabilizing. Manufacturers have reported a drop in new orders, and in November profit at big, mostly state-owned industrial firms declined for the first time in three years.
Beijing, which has scurried to respond, has tools at hand to shore up the economy. In recent months, it has given the green light to railway and other infrastructure projects shelved two years ago when the economy was stronger. Many economists expect expanded deficit spending this year, and Chinese leaders last month endorsed more tax cuts for businesses and households.
Overall growth for last year is likely to hit the government’s annual target of about 6.5%, at least by official statistics, and many analysts expect Beijing to set a slightly lower target for this year.
Some economists peg actual growth at about half the official rate as exporters, manufacturers and other businesses have retrenched in the face of slack demand at home. As they pull back, the prospect of job cuts, less overtime and lower bonuses may further damage consumer sentiment, feeding a downward spiral.
“The slowdown is worsening,” Nomura’s China economists said in a research note on Thursday. They cited declines in industrial production in the autumn that they say likely continued in December and will linger for several more months. Larry Hu, an economist at Macquarie Group, said the current economic downturn will probably lead to “more worse data in the first half of the year.”
Chinese consumers, especially in cities, feel stretched, dimming the prospects for a quick boost. Last year’s gasoline prices through November were up 14% from a year earlier. Health-care costs rose 4.5% in the period, more than twice the rate of consumer inflation, while prices of eggs and other groceries rose as much as 13%.
As the costs of daily life rise, housing—whether for rent or purchase— has taken a bigger bite. Nationwide, about 20% of total household spending goes to housing, with the rate topping 30% in Beijing and Shanghai, according to official figures. November housing prices in 70 cities were up more than 10% on average compared with a year earlier, official data showed, with smaller cities seeing the biggest boost.
Now, housing sales by value are beginning to stagnate and property investment is flattening. The result has been diminished savings and frayed nerves. In recent months, protests have broken out after developers cut prices on new apartments, angering homeowners who feared property values were on the verge of collapse.
Credit-card bills unpaid for six months at the end of September were up 33% from a year earlier, according to central-bank data. An annual survey of households, led by Gan Li, a professor at Southwestern University of Finance and Economics, showed that about 40% of Chinese families ended 2017 with no savings for that year.
Businesses fear the pullback in consumer spending, especially on nonessentials, will necessitate deeper sales discounts, potentially damaging their profit.
At the Shanghai Lao Miao Jewelry outlet in the eastern city of Zhenjiang, saleswoman Yang Ling said business is slow and customers are pickier about prices. “In the past, few customers would bargain, but now bargaining is commonplace,” said the 29-year-old, who was a sales leader.
At her outlet, Ms. Ling said revenue on Singles Day—the country’s heavily promoted Nov. 11 shopping day—was about half of the 2017 level, even with discounts.
Zhao Yanwei, who owns a printing business for books, newspapers and brochures in Beijing, doesn’t expect his income or that of his civil-servant wife to grow much this year. While Mr. Zhao said he doesn’t need a new car, he does want to replace his Apple iPhone 6 Plus. The 42-year-old businessman said he is probably going to choose a domestic brand like Huawei for cost reasons alone.
“Domestic brand names may not be as durable as iPhones, but the price difference is very large, so domestic cellphones still have an advantage,” said Mr. Zhao, who lives with his wife and 9-year-old child in Langfang, a Beijing bedroom community.
China has accounted for nearly 20% of Apple’s sales, with middle-class and wealthy Chinese snapping up its high-end devices. But the interrelationship goes beyond the consumer, as Apple also counts on the country for the final assembly of most products.
Apple directly employs about 10,000 people in China, including retail staff and engineers. Indirectly, an additional three million Chinese work at other outlets selling Apple products and suppliers making and assembling parts and finished devices for sale world-wide.
The drop-off in demand for Apple phones has already rattled the world’s largest facility assembling iPhones, a Foxconn Technology Co. plant in the central city of Zhengzhou. The plant isn’t offering overtime hours to workers assembling the three new iPhone models, the XR, the XS and the XS Max, a person familiar with the matter said.
The lack of overtime is in contrast to typical peak-production periods of years past. In recent months, thousands of workers have voluntarily left the Zhengzhou plant and other Foxconn facilities after overtime hours were cut, according to people familiar with the matter. Foxconn said it regularly reviews staffing levels, which fluctuate depending on seasonality, customer needs and other factors.
—Liyan Qi, Grace Zhu, Lin Zhu, Yoko Kubota, Shan Li and Trefor Moss
Appeared in the January 4, 2019, print edition as 'China’s Consumer Woes Reverberate.'更多精彩文章及讨论，请光临枫下论坛 rolia.net
As Apple shows, buyers defer major or discretionary purchases, their confidence dented by shaky economy, trade fight with U.S.
Jan. 3, 2019 9:37 a.m. ET
BEIJING—The Chinese consumer, a previously reliable driver of economic growth, is under stress, threatening to deepen a broad slowdown in China’s economy that is rattling global markets.
Consumers have pulled back spending, their confidence dented by the shaky domestic economy and a trade fight with the U.S. Meanwhile, they are feeling pinched by rising costs for already sky-high housing and often inadequate education and health care. As a result, people are putting off big-ticket purchases and limiting their discretionary spending.
No longer just a manufacturer for the world, China has become the largest market for many consumer, luxury and durable goods, as an expanding middle class flexes its spending power. Now, its newfound restraint is pounding the world’s No. 2 economy and rippling across the globe, crimping oil producers, electronics makers, travel services and a slew of other sectors.
Apple Inc. is the latest company to sound the warning, on Wednesday attributing a sharp falloff in iPhone revenue to China’s rapidly decelerating economy. Ford Motor Co. and General Motors Co. have reported significant sales drops for China in a monthslong slump that has hit foreign and domestic auto makers alike.
E-commerce titans, which thrived on robust consumer spending, are hitting speed bumps, with Alibaba Group Holding Ltd. cutting its revenue forecast and JD.com Inc. reporting a fall in active customer accounts. “If people are not buying new apartments or new homes, they’re not buying refrigerators,” Alibaba Vice Chairman Joseph Tsai told reporters in November.
Zhang Zhihong and her husband, an executive at a tech company, make a nearly $3,000 monthly mortgage payment on their apartment. After Ms. Zhihong left her job at a think tank in Beijing last year to find something closer to home to care for their 3-year-old child, the family put a hold on plans to trade in their Subaru XV crossover.
“I used to be, you know, rather carefree in spending. But after I had the kid and left my old job, I’m definitely thinking twice before any large spending,” she said.
Consumers, whose spending has expanded by double digits for most of the past decade, were supposed to power the Chinese economy for years to come. The government counted on them to buoy growth as its planners tried to shift a maturing economy toward services and away from the big-ticket infrastructure and smokestack industries that were creating debt and pollution.
The current slowdown stems in part from government policies to hold down housing prices and curb rising levels of mostly corporate debt. Additional drag has come from the trade fight between the U.S. and China. The two sides have levied punitive tariffs on products that make up 60% of their trade, injecting new risk for companies at home and markets abroad.
“Trade frictions with the U.S. disrupted a longstanding belief that China’s economic expansion will continue, albeit at a slower pace, thanks to its connection with the rest of the world,” said Fan Lei, an economist at brokerage firm Sealand Securities. Now, he said, worries about the strength of that connection are causing Chinese consumers to scale back.
Retail sales eased during most of last year, with growth decelerating to 8.1% in November—the lowest level in more than 15 years. Consumption accounted for more than three-quarters of China’s economic growth last year, but is likely to fall to just under two-thirds this year, said Wang Bin, a Commerce Ministry official.
In recent months, investment in factories, buildings and the like slowed to a rate unseen in at least a quarter-century before stabilizing. Manufacturers have reported a drop in new orders, and in November profit at big, mostly state-owned industrial firms declined for the first time in three years.
Beijing, which has scurried to respond, has tools at hand to shore up the economy. In recent months, it has given the green light to railway and other infrastructure projects shelved two years ago when the economy was stronger. Many economists expect expanded deficit spending this year, and Chinese leaders last month endorsed more tax cuts for businesses and households.
Overall growth for last year is likely to hit the government’s annual target of about 6.5%, at least by official statistics, and many analysts expect Beijing to set a slightly lower target for this year.
Some economists peg actual growth at about half the official rate as exporters, manufacturers and other businesses have retrenched in the face of slack demand at home. As they pull back, the prospect of job cuts, less overtime and lower bonuses may further damage consumer sentiment, feeding a downward spiral.
“The slowdown is worsening,” Nomura’s China economists said in a research note on Thursday. They cited declines in industrial production in the autumn that they say likely continued in December and will linger for several more months. Larry Hu, an economist at Macquarie Group, said the current economic downturn will probably lead to “more worse data in the first half of the year.”
Chinese consumers, especially in cities, feel stretched, dimming the prospects for a quick boost. Last year’s gasoline prices through November were up 14% from a year earlier. Health-care costs rose 4.5% in the period, more than twice the rate of consumer inflation, while prices of eggs and other groceries rose as much as 13%.
As the costs of daily life rise, housing—whether for rent or purchase— has taken a bigger bite. Nationwide, about 20% of total household spending goes to housing, with the rate topping 30% in Beijing and Shanghai, according to official figures. November housing prices in 70 cities were up more than 10% on average compared with a year earlier, official data showed, with smaller cities seeing the biggest boost.
Now, housing sales by value are beginning to stagnate and property investment is flattening. The result has been diminished savings and frayed nerves. In recent months, protests have broken out after developers cut prices on new apartments, angering homeowners who feared property values were on the verge of collapse.
Credit-card bills unpaid for six months at the end of September were up 33% from a year earlier, according to central-bank data. An annual survey of households, led by Gan Li, a professor at Southwestern University of Finance and Economics, showed that about 40% of Chinese families ended 2017 with no savings for that year.
Businesses fear the pullback in consumer spending, especially on nonessentials, will necessitate deeper sales discounts, potentially damaging their profit.
At the Shanghai Lao Miao Jewelry outlet in the eastern city of Zhenjiang, saleswoman Yang Ling said business is slow and customers are pickier about prices. “In the past, few customers would bargain, but now bargaining is commonplace,” said the 29-year-old, who was a sales leader.
At her outlet, Ms. Ling said revenue on Singles Day—the country’s heavily promoted Nov. 11 shopping day—was about half of the 2017 level, even with discounts.
Zhao Yanwei, who owns a printing business for books, newspapers and brochures in Beijing, doesn’t expect his income or that of his civil-servant wife to grow much this year. While Mr. Zhao said he doesn’t need a new car, he does want to replace his Apple iPhone 6 Plus. The 42-year-old businessman said he is probably going to choose a domestic brand like Huawei for cost reasons alone.
“Domestic brand names may not be as durable as iPhones, but the price difference is very large, so domestic cellphones still have an advantage,” said Mr. Zhao, who lives with his wife and 9-year-old child in Langfang, a Beijing bedroom community.
China has accounted for nearly 20% of Apple’s sales, with middle-class and wealthy Chinese snapping up its high-end devices. But the interrelationship goes beyond the consumer, as Apple also counts on the country for the final assembly of most products.
Apple directly employs about 10,000 people in China, including retail staff and engineers. Indirectly, an additional three million Chinese work at other outlets selling Apple products and suppliers making and assembling parts and finished devices for sale world-wide.
The drop-off in demand for Apple phones has already rattled the world’s largest facility assembling iPhones, a Foxconn Technology Co. plant in the central city of Zhengzhou. The plant isn’t offering overtime hours to workers assembling the three new iPhone models, the XR, the XS and the XS Max, a person familiar with the matter said.
The lack of overtime is in contrast to typical peak-production periods of years past. In recent months, thousands of workers have voluntarily left the Zhengzhou plant and other Foxconn facilities after overtime hours were cut, according to people familiar with the matter. Foxconn said it regularly reviews staffing levels, which fluctuate depending on seasonality, customer needs and other factors.
—Liyan Qi, Grace Zhu, Lin Zhu, Yoko Kubota, Shan Li and Trefor Moss
Appeared in the January 4, 2019, print edition as 'China’s Consumer Woes Reverberate.'更多精彩文章及讨论，请光临枫下论坛 rolia.net